Bottom Line: CMS Actuary Closes Books

by David Pittman David Pittman,Washington Correspondent, MedPage Today
January 19, 2013

BALTIMORE, Md. -- Rick Foster is about a year away from becoming eligible for one of the public health programs he helped oversee for nearly 2 decades.

Like many people at or near that age, Foster, 64, is going to retire on Feb. 1, leaving the post of chief actuary for the Centers for Medicare and Medicaid Services (CMS) -- a position he's held since February 1995.

His office is responsible for the financial analysis -- retrospective and prospective -- of Medicare and Medicaid, programs that, combined, accounted for roughly 35% of all healthcare spending in 2011. He also works with policymakers in Washington to dissect proposed healthcare legislation and changes to the two federal programs.

Along the way, Foster's fingerprints can be found on major aspects of Medicare policy. The 64-year-old was voted one of the 100 most influential people in U.S. healthcare by readers of Modern Healthcare magazine from 2007 to 2011.

His goal -- and that of the nearly 100 actuaries, economists, and statisticians who work under him -- was to provide the best, unbiased, technical information "so that Congress and the administration knew as much about what they were doing as possible," Foster told MedPage Today in an interview in his office at CMS' headquarters in Baltimore.

"They can decide the policy," Foster said. "In a few cases, we recognized the policy was not going to work the way they hoped or intended, and in some cases the proposal was actually modified before coming into law."

Stirring the Pot of Washington Politics

That attitude of offering independent advice has caused Foster and his office to ruffle the feathers of both Democratic and Republican administrations.

About 10 years ago, when Washington lawmakers and President George W. Bush were crafting the legislation that created Medicare's prescription drug program, Foster said it would cost far more than what the White House wanted to hear.

In an effort to suppress negative reports about the proposal, then-CMS Administrator Tom Scully decided he didn't want Foster and his office communicating directly with Congress. Scully wanted all reports to come through him before making their way to Capitol Hill. That way, Scully could release only the information that would support the legislation, Foster said.

The practice ran counter to the independence the Office of the Actuary had operated under for decades.

"I was going to resign in protest," Foster said. "My managers talked me out of it, and that set off this whole chain of events where any time I did respond, he would threaten to fire me."

Investigations later by the HHS Office of Inspector General, the Government Accountability Office, and others found Scully was wrong to keep Foster's office from communicating directly with Congress.

Foster admitted his office didn't consider the dramatic increase in the use of generic drugs, which account for upward of 80% of all prescriptions dispensed today. The increased use of generics has kept the cost of Part D much lower than Foster had projected before the law was passed.

He also spoke openly about how the Affordable Care Act's (ACA) reduction in payments to hospitals will have a long-term, negative impact. Foster predicted the continual 1% reduction in payments would slowly bankrupt hospitals, a concern he said this week remains true.

"The estimates we made, the technical advice that we provided, I think we did a really good job with all of that," Foster said. "We certainly weren't trying to make the Affordable Care Act look good or look bad."

His office projected 15% of all hospitals would be in the red in the next decade -- all other factors remaining constant -- with the cuts from the ACA.

"In my mind and in the thinking of others, that's a big concern," Foster said.

"Projecting healthcare costs is one of the most complicated things actuaries can do," he said. Medicare -- because of its complex nature and various provider groups -- is complicated by the many turning wheels and varying influences on healthcare usage.

One of Foster's foci of late has been on studying payment models that can slow the rate of growth in healthcare spending. That too isn't simple.

"To slow down the rate of the cost growth, you have to know what's causing it," said Foster, who received his MS in applied mathematics from the University of Maryland Baltimore County. "That's less straightforward."

Better coordination of care -- reducing the number of procedures and other things ordered -- can help save 5% and maybe up to 10% of healthcare costs, he said. Certain high-performing health systems like the Cleveland Clinic have reduced costs quickly in several years.

"If you follow them over a longer period, most of them continue to have the same growth rate as the national average," Foster said. "The growth rate is the issue."

While it's too early to access the work of the CMS Innovation Center, he has confidence the models they are examining -- whether it's as patient-centered medical homes, bundled payments, or accountable care organizations -- will bear fruit.

"Some of these things are going to work on a big scale or a large scale," he said. "And that's going to be very valuable to learn."

Next Steps for Foster, CMS

CMS hasn't found a successor yet for the man who has been its chief actuary for the last 18 years.

But after Foster walks down the halls of CMS' Baltimore office on Feb. 1, he hopes to retire for good and not work for some consulting firm or lobbying group. "Although, I reserve the right to change my mind," he said.

The last few years have made an already difficult job even tougher with the debate, passage, and implementation of the ACA. Days and work weeks became longer, and Foster said his health has suffered as a result.

"The first thing I'm going to do is join the YMCA and start swimming," Foster said with a chuckle. "Get myself back in shape. That will enable me to travel and do other hobbies with family and friends."

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